Forex Technical Analysis
What Is Forex Technical Analysis?
Forex technical analysis is the evaluation of the forex currency pair, using charts and some common technical indicators to determine the balance and inbalance in supply and demand of that currency pair. If demand is high, then the currency pair will be moving up and if supply is higher, then currency pair will be moving down. Forex technical analysis just study the market itself in the here and now, by watching price action itself. Technical analysis is a very broad topic in itself and there are many different technical indicators but I'll cover just only the technical tools that I personally use in my analysis. You can use them as they are or adopt mine.
From a short term perspective, taking trades off the 5 minute and 15 minute charts, forex technical analysis provides a strong basis for my daily decisions. On a long term basis, for those working long hours are still want to take advantage of this huge market, apply the same indicators on a daily and weekly chart.
The Forex Technical Analysis Indicators
There is a wide range of forex technical indicators. All technical analysis begins with a chart. Some technical analyst will look for chart patterns and only trade when those patterns occur, others will use technical indicators. I prefer a combination of chart patterns and a few indicators to keep my chart clean. I have already discussed most of the indicators I use on my trading charts. I will briefly explain each one below and the parameters. As a technician, I believe charts don't lie. If you are focused and discipline to stick to the technical trading parameters, you will be fine as a trader.
Forex Technical Indicators
Most successful forex traders find two or three indicators they can use successfully, and simply apply those over and over again. Keep your charts clean and simple by using just few indicators. You can follow the link to read more details on how I use them on my forex trading.
Triangular Moving Averages (TMA)
I really like this indicator, however it is not found on MT4 or MT5. It does not matter, the Simple Moving Average will work just fine.
Use TMA 5, TMA 21 and TMA 34.
Moving Average Convergence Divergence (MACD)
The settings are of MACD are (40,50,20)
The pivot settings are (R3,M5,R2,M4,R1,M3,PP,M2,S1,M1,S2,M0,S3). For details on this parameters follow the link.
Support and Resistance Watch resistance and support levels on higher time frames. You can choose to use the pivot points as support and resistance level for the day. Use the pivot points to note the support and resistance levels for the day. Click here for more details
Importance Of Forex Technical Analysis
Technical Analysis is the best analysis any short term trader can confidently use to trade the forex market. While fundamentals are important, they simply cannot help a trader assess the markets to generate short term trading signals. So a day trader while keeping an eye on the timing of news releases can confidently trade from charts based on current price action.There are many things that affect the forex market on a daily basis.
Price Actions on charts don't lie. These are factual information in the time at which you are watching the chart. That is what the market is doing period. Not even the fundamental traders can dispute that. Charts simply reflects the continuous and repetitive cycles of uncertainty, greed and fear. Which ever psychology in dominating the traders, will be reflected on the price action on the charts. To put it simply, you cannot successfully trade the forex without charts.
Important tip: Price action on charts don't lie. There is always someone on the other side of every trade you take. The question is: at the time of your trade who is right? Your chart analysis can always keep you on the right side.
Conclusion: Forex Technical Analysis
Forex technical analysis is very important for short term traders. The chart don't lie. Determine your rules and patterns and simple wait for the markets to present the opportunity to take your trade. Focus on your setup based on confluence of price action and indicators. Keep in mind that most often when news releases are out, the market will be volatile, however, it will always settle in most cases in the direction of the initial trend after all is set and done. In few occasions, there has been real change in direction based on the news release. If you a discipline trader or aspiring discipline trader, you will still be able to take advantage of news releases, based on your forex technical analysis trading setups.
Forex trading success using forex technical analysis is possible. Trading forex is an art that must be mastered. If you would like to expand your forex trading education then take some time to search for a mentor . Forex trading a high performance activity like golf, tennis and therefore a coach is highly recommended. Tiger Woods is a good golf player, but he has the best coach. If you want to be a great Forex Trader, then take sometime to search for a good coach.
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